Purchasing and company performance

Three indicators that prove that your company’s performance is directly linked to that of your procurement chain.

Many company directors will confess that they see their purchasing department as costly and inefficient—an obstacle on the road to successful entrepreneurship. But if you change the way you see the procurement chain and the actors that work in it, your company’s performance is bound to improve. The purchasing department can have a positive impact on the general performance of your business when you see it as an asset—when you place it front and centre among your priorities.

Your purchasing practices have a greater effect on your overall performance than you suspect. There are, however, indicators that can guarantee your success and positively influence your business performance. Take the time to consider these indicators. You can then examine those that may apply to your business model.

Your buyers are properly trained.

For J2, knowledge and understanding of the various procurement practices prioritized by our customers are significant data. They enable us to provide appropriate assistance towards optimizing these practices. We surveyed our collaborators, asking questions about how their purchasing function works, and found that training for buyers was sadly lacking. Most of the companies with whom we work do not make training available to their buyers. Fewer still are considering setting up a skills development and training plan.

We can never say it too often: your buyers’ level of training has a direct effect on your organization’s financial health. In all too many cases, buyers have not received training to help them fulfil their job description correctly and better understand issues in the market that the business operates in. This makes it very difficult for them to attain the expected performance. If, on top of this, buyers are not well informed about the organization’s specific needs, their actions may generate additional costs and loss of time that may end up costing your company dearly. However, it is of course possible to aim at the reverse situation: paying attention to the needs of those who work in the procurement chain is a strategy that shows your understanding of the breadth of their actions and the effects these actions can have on your business performance. Make sure that your buyers understand this too.

Your perception of the purchasing department is positive, as demonstrated by your actions.

Change your vision of the procurement chain from “roadblock” to “leading light.” Internally, highlight all the added value that the purchasing department represents. Acting in this way will increase the esteem in which everyone holds the purchasing department, enabling it to contribute to your company’s growth by generating better results.

But decisions taken by managers and other departments working closely with purchasing must be consistent with this vision. Respect must be shown not just in words but also in action. For example, any change in production must be communicated to buyers immediately. If production slows and products continue to be ordered at the same rate as during peak production, significant unnecessary costs will have to be absorbed. Conversely, a shortage of products when production suddenly increases is equally damaging for the company, which cannot meet its delivery times and fails to satisfy customers.

Having respect for the work of buyers means giving them all the information they need to perform optimally. This brings us back to the preceding point. A properly trained buyer will notice omissions in a purchase request and point them out to you. He or she will immediately seek out the missing information. But how much time is saved if requisitions are complete from the start! Also, if a representative of the procurement chain attends project/production meetings, his or her presence will make for clear, direct communication between the various departments during discussions of any points concerning potential changes or needs. A positive and respectful perception of the work of your buyers will save you much lost time.

Your purchasing department receives clear requests.

We stated above that clear, precise purchasing requests will facilitate a buyer’s work and, consequently, increase the company’s efficiency and the quality of service provided to customers. All too often, buyers will receive a requisition garnished with a Post-it note marked “ASAP.” Unfortunately, “ASAP” is not a delivery date. Buyers need several items of information that are often not provided. Are there special features of the product to be ordered? What quantity should be ordered? What need is the product to be ordered destined to fill? If the request conveys quality information, buyers will know what to purchase. They will be able to display their skill by obtaining the requested product at a reasonable cost, meeting the requisition’s needs for quality, and able to be delivered within the required time, rather than wasting precious time trying to understand the requisition and—too often—solve problems stemming from orders made on the basis of incomplete requests.

It should come as no surprise: communication is key here. The risks of errors, delays and misunderstandings are greatly reduced if communication is clearly established between departments. Encourage meticulous use of the communication tools you have in place, educate requesters on the correct way to make a purchase request, both manually and through the information system, and you will see your buyers’ efficiency shoot up.

Too obvious?

Whenever you plan to buy something for yourself, to fill a personal need, you will put a series of questions to the vendor, because you are looking for a product that will suit your purposes exactly, taking into consideration space, budget and usage constraints. The same applies to purchases for your company.

Do these recommendations appear simplistic to you? Do you take it for granted that requesters and buyers in most companies operate in this way? We have news for you: in most Québec companies, the reality is very different. In actual fact, these failings have a considerable impact on a business’ general performance. Can you afford to leave money lying on the table?

J2 invites you to try our procurement chain diagnostic service. We will give you a true picture of the health of your procurement chain. Will the results will reveal that things are as efficient as you suppose?